California racetracks would receive a yearly stipend (95 percent of the first $60 million collected each fiscal year).

Racetracks would be allowed to act as service providers so long as at least 50 percent of the revenue from the partnership between the operator and the track goes to the track.

Licensing fees and tax rates

Under the bill, cardrooms and tribes can apply for seven-year internet poker licenses at a cost of $12.5 million.

The fee is steep, but the one-time up-front payment is credited against future taxes owed on gross gaming revenue.

The bill calls for a progressive tax rate based on the cumulative gross gaming revenue of the entire industry.

If annual gross gaming revenues are:

Less than or equal to $150 million, the rate percent is 8.847%.

More than $150 million and less than or equal to $250 million, the rate percent is 10%.

More than $250 million and less than or equal to $350 million, the rate percent is 12.5%.

Greater than $350 million, the rate percent is 15%.

Bad actor language

AB 1677 doesn’t have a bright line date that would prevent existing online poker operators who operated in the US after passage of the UIGEA in 2016 — namelyPokerStars — from applying for a license.

Instead, Jones-Sawyer’s bill mostly leaves suitability up to regulators. (There are suitability requirements; however, none of these seem to be aimed directly at PokerStars).

This will be the hot-button issue that determines whether or not California makes any progress on the online poker front in 2017. With both sides dug in when it comes to suitability, the inclusion/exclusion of suitability language will likely be the focal point of debate.

Baseline regulations

AB 1677 calls on state regulators to “adopt regulations to implement the provisions within 270 days after the operative date of this bill.” All fees and vetting costs would be paid by the operator.

These fees are in addition to the one-time licensing fee.

The baseline regulations the bill calls for include, but are not limited to:

Underage gambling and problem gambling.

Resolution of player disputes and complaints.

Gaming system technical standards and practices.

Hardware and software standards and compliance.

License and work permit issuance and processes.

Suitability standards and determinations.

Temporary, provisional, and emergency approvals.

Effect of receiverships, bankruptcy, insolvency, inheritance and trusts affecting ownership of a licensee.

Appeals from adverse decisions.

AB 1677 would also establish the Unlawful Gambling Enforcement Fund. The purpose of the UGEF is to provide law enforcement with the resources it needs to go after offshore sites and enforce the regulations of the law.

Bottom line for CA online poker

AB 1677 is a solid attempt to build upon the progress made over the years, from licensing and taxation rates to the racing compromise.

However, the lingering suitability issue is noticeably glossed over in the otherwise complete text. The resolution of that matter would need to take place for this bill to make any progress.

Steve Ruddock -
Steve covers nearly every angle of online poker in his job as a full-time freelance poker writer. His primary focus for OPR is the developing legal and legislative picture for regulated US online poker and gambling.